Nokia CEO Reflects on Phone Maker’s Challenges

CEO Stephen Elop says Nokia “represented a landscape of unpolished gems” when he first started in the company in 2010.

By John D. Stoll

Stephen Elop took the helm at Nokia Corp. in late 2010 as the company’s grip on the global mobile device market was clearly fading. Once the dominant player in the industry, Nokia was spending billions of dollars on R&D projects, but some of its best innovations were not making it to market.

A front page story in Thursday’s Wall Street Journal by Anton Troianovski and Sven Grundberg sheds further light on the culture Mr. Elop walked into, and some of the opportunities Nokia missed in recent years.

Mr. Elop, 48, sat down with WSJ for a series of interviews in recent weeks to discuss what he encountered when he got to the Finnish company. He remembers looking at Nokia’s “landscape of unpolished gems” and believed that if the company had put more emphasis on getting key innovations to market it would likely have landed in a better place.

Since taking over, he’s pushed to get hot technology on the market – such as the PureView camera phone – while also sifting through various projects and deciding which ones had to be abandoned as part of Nokia’s cost-cutting efforts, including two in-house operating systems.

Here is an edited excerpt of WSJ’s discussion with Mr. Elop:

Will you give us some insight into how you felt coming into Nokia and seeing at least some of the key innovation fail to reach full potential?Nokia represented a landscape of unpolished gems…as I began to see what was going on in the labs, as I saw the innovation underway, as I accounted for where the R&D dollars were being applied, there were and there continue to be all sorts of great efforts and products and technology available, under way, but they weren’t landing in the products.

They were certainly showing up in the strength of the patent portfolio, something we’re very proud of. But of course, just doing a patent is not sufficient to fully monetize it. They needed to show up in the products as points of differentiation as well.

Could you give us some specific examples of what you saw?
When you look closely at where the efforts were and where the challenges were, a lot of it dates back to the (Symbian) operating system efforts that had been under way for quite some number of years and there is a term that I’ve used that is a little bit of a colloquialism – the waxy buildup of Symbian.

Wax sort of builds up and at some point you’ve got to do something about it. Symbian was in a situation after many many years of good investments and some good productivity for the assets, yet it had become one of the principle reasons that all of this innovation couldn’t land quickly enough.

How are things changing under your leadership?
I’ll give you an example that is really topical right now because it is a very visible one and that is the PureView imaging technology. That’s technology that I saw within weeks of showing up u at Nokia and I could recognize it as absolutely groundbreaking, this was amazing work.

But it had been in the labs struggling to break through and failing to show up in product for four or five years before then. You look at something like that as one example (if) that type of technology had landed some years ago I think the fortunes of Nokia would have been in a different spot.

There is much being made of Nokia’s patent portfolio and its value to the company. Can you elaborate?
You know on an iPhone, you touch on the digital keyboard and you know how the letter pops up and shows up bigger so you’re making sure you’re touching the correct letter? That’s Nokia innovation. That’s something that Nokia designed and patented but it didn’t land in Nokia products for many years, and yet Apple had taken advantage of that innovation and landed it in their products.

So there are some really good examples of innovation that Nokia had invested in, had patented and so forth but because of this barrier that Symbian represented they just couldn’t land the products fast enough.

Nokia has been outspending Apple five-to-one on research and development. Do you think this high spending on R&D is a problem for you?
First of all, at any company, the investment in research and development in the products is the lifeblood, so that is a critical element of anyone’s future going forward. What I have been focused on doing is improving and fixing how we are making our investments in research and development…

So, for example, it used to be the case that Symbian products would take you know officially a year to begin with, but by the time they were out it often took two years or even longer from the time they were originally created. You saw the first Lumia product six months after we signed the agreement with Microsoft.

You’ve tied yourself in some ways to Microsoft in a way that shifts the business model. Does that complicate the business, or make it stronger?
What we’ve done deliberately with Microsoft is enter into a strategic partnership where we both understand that we have strong dependencies on each other. That creates an environment for an effective partnership.

There are things we need Microsoft to do to support us, there are bets that we place because we’re using Windows phone. But equally they obviously have a strong bet on us by using Nokia as the principle partner for mobile devices. Also, they have a very strong dependency on us as it relates to location based services.

Nokia used to define the whole industry. Nokia innovated and people followed. That’s not the case anymore. Do you agree and, if so, how is this changing the company?
You’ve actually identified one of the fundamental challenges that I inherited at Nokia when I joined. To the extent that any company believes that they get to define consumers wishes or they get to define an industry, therein lies the recipe for failure. At the end of the day no one gets to do that other than the consumers making the purchases.

So one of the changes I’m driving within Nokia is to adopt what we call “the challenger mindset.” Let’s understand that we have to fight, we have to fight our way through the difficulties, we have to listen to consumers, we have to both deliver what they need and also have some creativity and insight and deliver what the don’t yet know they need. We’ve got to focus on that.

Look at the history. Clamshells. The lack of clamshell devices in the United States saw our market share drop dramatically when Motorola introduced their clamshell devices. For years we didn’t pursue the very strong trend of dual SIM devices in India. And then we didn’t do anything about touch, believing that if we didn’t do it, it wouldn’t happen.